The Importance of ALTA Surveys in Commercial Real Estate Transactions

The purchase of commercial real estate can be complicated and involves a significant investment, so buyers must exercise due diligence to be sure they are getting exactly what they are paying for – and a land survey does just that. 

This due diligence includes ample research on the land, the property, and the sellers. Boundary disputes and unrecorded easements are expensive issues to resolve and can affect both what the property is worth and what you can do with it.  An ALTA survey relies on high standards when searching land records and in the preparation of insurance documents to avoid land title problems as much as possible. As a result, it is the most relied-upon type of survey for commercial real estate transactions.

What type of land survey should you use for commercial real estate? 

Title insurance companies and/or lenders typically require an ALTA survey to be performed whenever a piece of commercial property is being refinanced or exchanging hands. Commercial real estate can come with certain “survey risks,” including boundary line disputes, encroachments, or easements or claims of easements not found in public records, and an ALTA survey can help identify these risks before the purchase. 

What is an ALTA survey?

The ALTA survey is a detailed land parcel map, showing all existing improvements of the property, utilities, and significant observations within the insured real property. The survey also details the licensed surveyor’s findings concerning the property boundaries and how they relate to the title.

An ALTA survey is based on standards put forth jointly by the American Land Title Association and the National Society of Professional Surveyors, utilizing a universal standard that provides confidence that results are guaranteed. This type of survey is typically contracted by the title company, lender, or attorneys representing involved parties for commercial property purchases, refinances, or improvements.

While an ALTA survey is more expensive than the other types of land surveys, it reveals much more extensive information about real property and helps to protect a real property investment. An ALTA survey can safeguard your commercial real estate investment from claims that a simple title search or more basic survey may not disclose and, ultimately, help to identify the potential benefits and downfalls of ownership.

Can a Commercial Mortgage Location be used instead of an ALTA survey?

A commercial mortgage location is a low-cost alternative to an ALTA survey, although it also sacrifices some accuracy. It is usually up to the lender and underwriter as to whether an ALTA survey is required. The commercial mortgage location survey follows the same state standards as a residential mortgage location survey, so the lender must be willing to accept these standards in place of the ALTA standards.

Although a commercial MLS may cost significantly less than an ALTA survey, an ALTA Survey provides information about property boundaries and easements, as well as improvements such as fences, trails, roads, rights of ways, and other features on the property that may affect ownership of the property. Both products provide value, but the type needed for each unique situation is best assessed by lending and underwriting. Investing in a land survey is an investment in peace of mind, both now, and down the road that your largest investment is accurately documented and protected. At McSteen, we bring more than 50 years of experience to each real estate transaction. Contact us today to let us help you determine which type of survey best protects your commercial real estate purchase.

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